XY has a weighted average cost of capital (WACC) of 10% based on its gearing level...

CIMA F2 Question Answer

XY has a weighted average cost of capital (WACC) of 10% based on its gearing level (measured as debt/debt+equity) of 40%. It is considering a signficant new project.

In which of the following situations would it be appropriate to appraise this project using XY's existing WACC of 10%?

The project is in a different industry to XY's current operations and funded entirely by equity.

The project is an extension of XY's current operations and is funded 40% by debt and 60% by equity.

The project is an extension of XY's current operations and is funded by equal amounts of debt and equity.

The project is in a different industry to XY's current operations and is funded by equal amounts of debt and equity.

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Vendor: CIMA
Product: F2
Update on: Jul 29, 2025
Questions: 268

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XYZ had 600,000 ordinary shares in issue on 1 July 20X4.

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XY has a weighted average cost of capital (WACC) of 10% based on its gearing level...

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